management principles v1 0

The book that is the foundation for how you learn about, study, and teach Principles is titled Principles of Management: A Behavioral Approach, and behavioral has very important implicat

Management Principles

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About the Authors 1

Acknowledgments 3

Dedications 6

Preface 7

Chapter 1: Introduction to Principles of Management 10

Who Are Managers? 13

Leadership, Entrepreneurship, and Strategy 19

Planning, Organizing, Leading, and Controlling 27

Economic, Social, and Environmental Performance 33

Performance of Individuals and Groups 39

Your Principles of Management Survivor’s Guide 45

Chapter 2: Personality, Attitudes, and Work Behaviors 59

Personality and Values 62

Perception 80

Work Attitudes 88

The Interactionist Perspective: The Role of Fit 94

Work Behaviors 97

Developing Your Positive Attitude Skills 111

Chapter 3: History, Globalization, and Values-Based Leadership 113

Ancient History: Management Through the 1990s 115

Contemporary Principles of Management 123

Global Trends 129

Globalization and Principles of Management 137

Developing Your Values-Based Leadership Skills 143

Chapter 4: Developing Mission, Vision, and Values 149

The Roles of Mission, Vision, and Values 152

Mission and Vision in the P-O-L-C Framework 157

Creativity and Passion 165

Stakeholders 176

Crafting Mission and Vision Statements 183

Developing Your Personal Mission and Vision 191

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How Do Strategies Emerge? 213

Strategy as Trade-Offs, Discipline, and Focus 217

Developing Strategy Through Internal Analysis 228

Developing Strategy Through External Analysis 240

Formulating Organizational and Personal Strategy With the Strategy Diamond 252

Chapter 6: Goals and Objectives 261

The Nature of Goals and Objectives 263

From Management by Objectives to the Balanced Scorecard 268

Characteristics of Effective Goals and Objectives 277

Using Goals and Objectives in Employee Performance Evaluation 284

Integrating Goals and Objectives with Corporate Social Responsibility 291

Your Personal Balanced Scorecard 299

Chapter 7: Organizational Structure and Change 306

Organizational Structure 308

Contemporary Forms of Organizational Structures 317

Organizational Change 322

Planning and Executing Change Effectively 334

Building Your Change Management Skills 341

Chapter 8: Organizational Culture 343

Understanding Organizational Culture 345

Measuring Organizational Culture 349

Creating and Maintaining Organizational Culture 358

Creating Culture Change 374

Developing Your Personal Skills: Learning to Fit In 379

Chapter 9: Social Networks 382

An Introduction to the Lexicon of Social Networks 385

How Managers Can Use Social Networks to Create Value 391

Ethical Considerations with Social Network Analysis 403

Personal, Operational, and Strategic Networks 411

Mapping and Your Own Social Network 418

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What Do Leaders Do? Behavioral Approaches to Leadership 434

What Is the Role of the Context? Contingency Approaches to Leadership 439

Contemporary Approaches to Leadership 449

Developing Your Leadership Skills 464

Chapter 11: Decision Making 468

Understanding Decision Making 470

Faulty Decision Making 486

Decision Making in Groups 491

Developing Your Personal Decision-Making Skills 499

Chapter 12: Communication in Organizations 501

Understanding Communication 503

Communication Barriers 509

Different Types of Communication 522

Communication Channels 530

Developing Your Personal Communication Skills 541

Chapter 13: Managing Groups and Teams 546

Group Dynamics 548

Understanding Team Design Characteristics 559

Organizing Effective Teams 574

Barriers to Effective Teams 581

Developing Your Team Skills 584

Chapter 14: Motivating Employees 586

Need-Based Theories of Motivation 589

Process-Based Theories 598

Developing Your Personal Motivation Skills 619

Chapter 15: The Essentials of Control 622

Organizational Control 624

Types and Levels of Control 635

Financial Controls 641

Nonfinancial Controls 651

Lean Control 659

Crafting Your Balanced Scorecard 666

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The War for Talent 682

Effective Selection and Placement Strategies 688

The Roles of Pay Structure and Pay for Performance 695

Designing a High-Performance Work System 702

Tying It All Together—Using the HR Balanced Scorecard to Gauge and Manage Human Capital, Including Your Own 709

vi

Mason Carpenter

Mason A Carpenter (Ph.D., 1997, UT Austin) is the M

Keith Weikel Professor of Leadership in UW Madison’s

Wisconsin School of Business He is responsible for the

MBA and Executive MBA courses in business, corporate,

and global strategy, and the curriculum offered through

Wisconsin’s Strategic Leadership Institute He is

coauthor of Strategic Management: A Dynamic Perspective,

second edition, with Dr Gerry Sanders and published by

Prentice Hall His research concerns corporate

governance, top management teams, social networks,

and the strategic management of global start-ups, and is

published widely in top management and strategy

journals He is Associate Editor of the Academy of

Management Review and the Strategic Management Area

Editor for Business Expert Press, and serves on a handful of editorial boards His

teaching accomplishments include MBA Professor of the Year, notoriety as one of

the two most popular professors in several Business Week MBA program polls, the

Larson Excellence in Teaching Award from the School of Business, and, most

recently, a Distinguished Teaching Award from the University of

Wisconsin–Madison

Talya Bauer

Talya Bauer (Ph.D., 1994, Purdue University) is the Gerry

and Marilyn Cameron Professor of Management at

Portland State University Dr Bauer is an

award-winning teacher who specializes in teaching

organizational behavior, management, power and

influence, and negotiations, as well as training and

development at the graduate and undergraduate level

She conducts research about relationships at work

More specifically, she works in the areas of leadership,

selection, and new employee onboarding, which have

resulted in dozens of journal publications She has acted

as a consultant for a variety of government, Fortune

1000, and start-up organizations Dr Bauer is involved

1

in professional organizations and conferences at the national level, such as serving

on the Human Resource Management Executive Committee of the Academy ofManagement and SIOP Program Chair and member-at-large for SIOP She is the

editor of Journal of Management and is on the editorial boards for the Journal of

Applied Psychology and Industrial and Organizational Psychology: Perspectives on Science and Practices, was recognized as one of the most published authors of the 1990s, and

is a Fellow of SIOP and APS

Berrin Erdogan

Berrin Erdogan (Ph.D., 2002, University of Illinois atChicago) is the Express Employment ProfessionalsEndowed Professor at Portland State University Dr

Erdogan is an award-winning teacher who teachesmanagement, organizational behavior, and humanresources management Her research interests focus onindividual attachment to organizations through

fairness, leader-subordinate relations, contextualfactors such as organizational culture, and person-organization fit Her work has been published in

journals such as Academy of Management Journal, Journal

of Applied Psychology, and Personnel Psychology She has

conducted managerial seminars on the topics ofmotivation, organizational justice, performanceappraisals, and training and development, and has worked as a corporate trainer

She serves on the editorial boards of Journal of Applied Psychology, Journal of

Management, Journal of Organizational Behavior, and Personnel Psychology.

2

We want to thank Margaret Lannamann for doing such a great job keeping all theballs in the air, and Jeff Shelstad and Eric Frank for having the vision and

persistence to bringUnnamed Publisherinto being and for their faith in us asamong the firstUnnamed Publisherauthors Many thanks, too, to the talentedAndrea Meyer, who was an invaluable resource in providing background contentfor several of our chapters We also thank Elsa Peterson for her tireless and amazingdevelopmental editing, Brett Guidry for helping to keep everything on track, andSharon Koch and Evelyn Forte for their expertise and contagiously positive

perspectives We further thank Dean Scott Dawson and Portland State University,and Michele Yoder and the University of Wisconsin–Madison for supporting ourwork

We would also like to thank the following colleagues whose comprehensive

feedback and suggestions for improving the material helped make this a better text:Erin Atchley, University of Tennessee at Knoxville

Laura Bulas, Central Community College

Val Calvert, San Antonio College

Sylvia Charland, Fitchburg State College

Dexter Davis, Niagara University

Matt DeLuca, Baruch College

Charles Englehardt, St Leo University

Jeff Fahrenwald, Rockford College

Carolyn Fausnaugh, Florida Institute of Technology

Don Furman, SUNY New Paltz/SUNY OCCC

3

Shelly Gardner, Augustana CollegeHugh Graham, Loras CollegeBruce Gillies, California Lutheran UniversitySusan Greer, Horry-Georgetown Technical CollegeDewey Hemphill, Crichton College

Kirk Heriot, Columbus State UniversityBetty Hoge, Bridgewater CollegeGerald Hollier, University of Texas at BrownsvilleKathleen Jones, University of North DakotaClaire Kent, Mary Baldwin College

Daniel Kent, Northern Kentucky UniversityAnita Leffel, The University of Texas at San AntonioDamian Lonsdale, University of South DakotaDaniel Morrell, University of South CarolinaFrancine Newth, Providence College

Roy Pipitone, Erie Community CollegeMichael Provitera, Barry UniversityLinda Sargent, University of Texas Pan American

4

Mukesh Sud, Augustana CollegeNicholas Twigg, Coastal Carolina UniversityNkuma Uche, Central Community CollegeDonna Waldron, Manchester Community CollegeCarolyn Youssef, Bellevue University

The authors also appreciate the efforts of those instructors who have contributed tothe project with their work on supplementary materials Anita Leffel from theUniversity of Texas at San Antonio developed the Student Quizzes and the Test ItemFile, and Laura Bulas from Central Community College created the PowerPoint slidepresentations

In addition, two instructors assisted the development of this material by using it intheir classrooms Their input, along with their students’ feedback, has provided uswith valuable feedback and confirmation that the material is effective in theclassroom:

Dexter Davis, Niagara University

P Gerald Shaw, Dean College

The cadre of copy editors, graphics designers, and technical designers involved inthis first-of-its-kind global publishing project also garner our heartfelt thanks.Finally, this book would not have the incredible value and meaning it does withoutthe support and interest of the faculty and students who have commented on earlyiterations and will serve to make this “their book” in the many years to come

5

This book is dedicated to my husband, Horst, and our children, Nicholas and

Alexander, who supported this project from the start and who helped me celebratewhen it was done

Berrin Erdogan

This book is dedicated to my husband, Emre, for being a constant source of supportfor my career and to our son, Devin, for making me appreciate the importance ofleading a balanced life

6

Welcome to the textbook revolution (you will have to read on to learn more about

the revolution that you have joined in using this material for your class) We are

happy to have you on Carpenter, Bauer, and Erdogan’s Principles of Management team! Given that Principles is likely to be one of the first management courses, if not

one of the first business courses, that students take, our objective in developing thismaterial was to provide students and instructors with a solid and comprehensivefoundation on the fundamentals of management Each of the sixteen chapters is

comprehensive but succinct, and action-oriented but not busy (as in busy work).

Moreover, the book and supplements have been written in a direct and active stylethat we hope students and instructors find both readily accessible and relevant

Delivering on Our Promise

So how are we delivering on these promises? Let’s consider the top three ways cited

by instructors and students First, your Principles book is organized around the

well-established planning, organizing, leading, and controlling framework (or, simply,

P-O-L-C) The first three chapters introduce you to the managerial context, whilethe remaining thirteen chapters are mapped to one of the four P-O-L-C sections.The P-O-L-C structure provides a number of benefits Each chapter opens with abrief discussion of how the chapter topic fits in P-O-L-C For instructors, the use ofP-O-L-C as an overarching framework helps with the organization of class material,development of the class calendar, and making choices about adding or removingreadings and real-life examples It also provides them with an invaluable referencepoint at the beginning and conclusion of each class session to share with students

“where we’ve been, and where we’re going next.” Pedagogically, this is a simple yetpowerful tool to aid and promote student learning For students, the P-O-L-C

typology provides them with an enduring framework for processing and organizingjust about everything they will learn and experience, during and beyond theirclassroom-based education, related to the management of organizations

Second, there are three underlying themes carried through all the chapters These

themes are strategic thinking, entrepreneurial thinking, and active management.

Strategy, for instance, is explicitly concerned with the determinants of high

performance Importantly, you will find that we treat performance using the notion

of the triple bottom line—the idea that economic performance allows individualsand organizations to perform positively in social and environmental ways as well.The triple bottom line is financial, social, and environmental performance

7

The entrepreneurial dimension reflects an underlying and growing trend thatshows that students and instructors see themselves as entrepreneurs and activechange agents, not just managers By starting fresh with an entrepreneurial/changemanagement orientation, we provide an exciting perspective on the principles ofmanagement.

Finally, starting with the opening chapter, we incorporate an active managementperspective to show how leaders and leadership are essential to personal andorganizational effectiveness and effective organizational change Moreover, theconcluding section of each chapter is focused on the assessment and development

of particular management skills Students and instructors are active as leaders at anincreasingly early age and are sometimes painfully aware of the leadership failingsthey see in public and private organizations It is the leader and leadership that

bring Principles together.

Third, your author team is bringing a truly interdisciplinary perspective to your

Principles course The book that is the foundation for how you learn about, study,

and teach Principles is titled Principles of Management: A Behavioral Approach, and

behavioral has very important implications for our emphasis on skills and decision

making, coupled with the strategic, entrepreneurial, and leadership orientations.Your authors are award-winning teachers who couple a deep knowledge andexperience about the book’s conceptual underpinnings with a sincere appreciationfor experiential teaching approaches

Thank You for Joining the Revolution

In adopting Carpenter, Bauer, and Erdogan, you are joining the revolution that is

otherwise known asUnnamed Publisher, our partner and publisher For this wethank you The people atUnnamed Publisherand your author team share a

common vision about the future of management education that is based on powerful

but fun and simple-to-use teaching and learning tools Moreover,Unnamed Publishergives you—you the student and you the instructor—the power to choose Oursixteen chapters are written using a “modular” format with self-contained sectionsthat can be reorganized, deleted, “added to,” and even edited at the sentence level.Using our build-a-book platform, you can easily customize your book to suit yourneeds and those of your students An extensive author-prepared instructors’

manual and excellent set of PowerPoint slides provide teaching support toinstructors A test item file developed using state-of-the-art assessment techniquessupports faculty in evaluating student performance

Only withUnnamed Publisherlearning platforms do you have the power to choose

what your Principles book looks like, when and how you access your Principles

8

material, what you use and don’t use, when it will be changed, how much you payfor it, and what other study vehicles you leverage These innovative study vehiclesrange from book podcasts, flash cards, and peer discussion groups organized insocial network formats Nowhere else on the planet can this combination of user-friendliness, user choice, and leading edge technologies be found for businesseducation and learning.

Thank you for joining the revolution—please spread the word!

Mason, Talya, and Berrin

9

Figure 1.1

Managers make things happen through strategic and entrepreneurial leadership.

© 2010 Jupiterimages Corporation

Introduction to Principles of Management

W H A T ’ S I N I T F O R M E ?

Reading this chapter will help you do the following:

1 Learn who managers are and about the nature of their work

2 Know why you should care about leadership, entrepreneurship, andstrategy

3 Know the dimensions of the planning-organizing-leading-controlling O-L-C) framework

(P-4 Learn how economic performance feeds social and environmentalperformance

5 Understand what performance means at the individual and group levels

6 Create your survivor’s guide to learning and developing principles ofmanagement

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We’re betting that you already have a lot of experience with organizations, teams,and leadership You’ve been through schools, in clubs, participated in social orreligious groups, competed in sports or games, or taken on full- or part-time jobs.Some of your experience was probably pretty positive, but you were also likelywondering sometimes, “Isn’t there a better way to do this?”

After participating in this course, we hope that you find the answer to be “Yes!”While management is both art and science, with our help you can identify anddevelop the skills essential to better managing your and others’ behaviors whereorganizations are concerned

Before getting ahead of ourselves, just what is management, let alone principles ofmanagement? A manager’s primary challenge is to solve problems creatively, andyou should viewmanagement1as “the art of getting things done through theefforts of other people.”We draw this definition from a biography of Mary Parker

Follett (1868–1933) written by P Graham, Mary Parker Follett: Prophet of Management

(Boston: Harvard Business School Press, 1995) Follett was an American socialworker, consultant, and author of books on democracy, human relations, andmanagement She worked as a management and political theorist, introducing suchphrases as “conflict resolution,” “authority and power,” and “the task of

leadership.” Theprinciples of management2, then, are the means by which youactually manage, that is, get things done through others—individually, in groups, or

in organizations Formally defined, the principles of management are the activitiesthat “plan, organize, and control the operations of the basic elements of [people],materials, machines, methods, money and markets, providing direction andcoordination, and giving leadership to human efforts, so as to achieve the soughtobjectives of the enterprise.”The fundamental notion of principles of managementwas developed by French management theorist Henri Fayol (1841–1925) He iscredited with the original planning-organizing-leading-controlling framework (P-O-L-C), which, while undergoing very important changes in content, remains the

dominant management framework in the world See H Fayol, General and Industrial

Management (Paris: Institute of Electrical and Electronics Engineering, 1916) For

this reason, principles of management are often discussed or learned using aframework called P-O-L-C, which stands for planning, organizing, leading, andcontrolling

Managers are required in all the activities of organizations: budgeting, designing,selling, creating, financing, accounting, and artistic presentation; the larger theorganization, the more managers are needed Everyone employed in an

organization is affected by management principles, processes, policies, andpractices as they are either a manager or a subordinate to a manager, and usuallythey are both

1 The art of getting things done

through the efforts of other

people.

2 The means by which you

actually manage, that is, get

things done through others.

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Managers do not spend all their time managing When choreographers are dancing

a part, they are not managing, nor are office managers managing when theypersonally check out a customer’s credit Some employees perform only part of thefunctions described as managerial—and to that extent, they are mostly managers inlimited areas For example, those who are assigned the preparation of plans in anadvisory capacity to a manager, to that extent, are making management decisions

by deciding which of several alternatives to present to the management However,they have no participation in the functions of organizing, staffing, and supervisingand no control over the implementation of the plan selected from those

recommended Even independent consultants are managers, since they get most

things done through others—those others just happen to be their clients! Of course,

if advisers or consultants have their own staff of subordinates, they become amanager in the fullest sense of the definition They must develop business plans;hire, train, organize, and motivate their staff members; establish internal policiesthat will facilitate the work and direct it; and represent the group and its work tothose outside of the firm

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Figure 1.2

1.1 Who Are Managers?

L E A R N I N G O B J E C T I V E S

1 Know what is meant by “manager”

2 Be able to describe the types of managers

3 Understand the nature of managerial work

Managers

We tend to think about managers based on their position in an organization Thistells us a bit about their role and the nature of their responsibilities The followingfigure summarizes the historic and contemporary views of organizations with

respect to managerial roles.S Ghoshal and C Bartlett, The Individualized Corporation:

A Fundamentally New Approach to Management (New York: Collins Business, 1999) In

contrast to the traditional, hierarchical relationship among layers of managementand managers and employees, in the contemporary view, top managers support andserve other managers and employees (through a process called empowerment), just

as the organization ultimately exists to serve its customers and clients

Empowerment3is the process of enabling or authorizing an individual to think,behave, take action, and control work and decision making in autonomous ways

In both the traditional and contemporary views ofmanagement, however, there remains the need for

different types of managers Top managers are

responsible for developing the organization’s strategyand being a steward for its vision and mission A secondset of managers includes functional, team, and general

managers Functional managers are responsible for the

efficiency and effectiveness of an area, such as

accounting or marketing Supervisory or team managers

are responsible for coordinating a subgroup of aparticular function or a team composed of membersfrom different parts of the organization Sometimes youwill hear distinctions made between line and staffmanagers

A line manager leads a function that contributes directly

to the products or services the organization creates For example, a line manager

3 The process of enabling or

authorizing an individual to

think, behave, take action, and

control work and decision

making in autonomous ways.

13

Communication is a key managerial role.

© 2010 Jupiterimages Corporation

(often called a product, or service manager) at Procter &

Gamble (P&G) is responsible for the production,marketing, and profitability of the Tide detergent

product line A staff manager, in contrast, leads a

function that creates indirect inputs For example,finance and accounting are critical organizationalfunctions but do not typically provide an input into thefinal product or service a customer buys, such as a box

of Tide detergent Instead, they serve a supporting role

A project manager has the responsibility for the planning, execution, and closing of

any project Project managers are often found in construction, architecture,consulting, computer networking, telecommunications, or software development

A general manager is someone who is responsible for managing a clearly identifiable

revenue-producing unit, such as a store, business unit, or product line Generalmanagers typically must make decisions across different functions and haverewards tied to the performance of the entire unit (i.e., store, business unit, productline, etc.) General managers take direction from their top executives They mustfirst understand the executives’ overall plan for the company Then they set specificgoals for their own departments to fit in with the plan The general manager ofproduction, for example, might have to increase certain product lines and phase outothers General managers must describe their goals clearly to their support staff.The supervisory managers see that the goals are met

Figure 1.3 The Changing Roles of Management and Managers

The Nature of Managerial Work

Managers are responsible for the processes of getting activities completedefficiently with and through other people and setting and achieving the firm’s goalsthrough the execution of four basic management functions: planning, organizing,leading, and controlling Both sets of processes utilize human, financial, andmaterial resources

Of course, some managers are better than others at accomplishing this! There havebeen a number of studies on what managers actually do, the most famous of those

conducted by Professor Henry Mintzberg in the early 1970s.H Mintzberg, The

Nature of Managerial Work (New York: Harper & Row, 1973) One explanation for

Mintzberg’s enduring influence is perhaps that the nature of managerial work haschanged very little since that time, aside from the shift to an empowered

relationship between top managers and other managers and employees, andobvious changes in technology, and the exponential increase in informationoverload

After following managers around for several weeks, Mintzberg concluded that, tomeet the many demands of performing their functions, managers assume multipleroles A role is an organized set of behaviors, and Mintzberg identified ten rolescommon to the work of all managers As summarized in the following figure, theten roles are divided into three groups: interpersonal, informational, and

decisional The informational roles link all managerial work together Theinterpersonal roles ensure that information is provided The decisional roles makesignificant use of the information The performance of managerial roles and therequirements of these roles can be played at different times by the same managerand to different degrees, depending on the level and function of management Theten roles are described individually, but they form an integrated whole

The three interpersonal roles are primarily concerned with interpersonalrelationships In the figurehead role, the manager represents the organization in allmatters of formality The top-level manager represents the company legally andsocially to those outside of the organization The supervisor represents the workgroup to higher management and higher management to the work group In theliaison role, the manager interacts with peers and people outside the organization.The top-level manager uses the liaison role to gain favors and information, whilethe supervisor uses it to maintain the routine flow of work The leader role definesthe relationships between the manager and employees

Figure 1.4 Ten Managerial Roles

The direct relationships with people in the interpersonal roles place the manager in

a unique position to get information Thus, the three informational roles areprimarily concerned with the information aspects of managerial work In themonitor role, the manager receives and collects information In the role ofdisseminator, the manager transmits special information into the organization Thetop-level manager receives and transmits more information from people outsidethe organization than the supervisor In the role of spokesperson, the managerdisseminates the organization’s information into its environment Thus, the top-level manager is seen as an industry expert, while the supervisor is seen as a unit ordepartmental expert

The unique access to information places the manager at the center oforganizational decision making There are four decisional roles managers play Inthe entrepreneur role, the manager initiates change In the disturbance handlerrole, the manager deals with threats to the organization In the resource allocatorrole, the manager chooses where the organization will expend its efforts In thenegotiator role, the manager negotiates on behalf of the organization The top-levelmanager makes the decisions about the organization as a whole, while the

supervisor makes decisions about his or her particular work unit

The supervisor performs these managerial roles but with different emphasis thanhigher managers Supervisory management is more focused and short-term inoutlook Thus, the figurehead role becomes less significant and the disturbancehandler and negotiator roles increase in importance for the supervisor Sinceleadership permeates all activities, the leader role is among the most important ofall roles at all levels of management.

So what do Mintzberg’s conclusions about the nature of managerial work mean foryou? On the one hand, managerial work is the lifeblood of most organizationsbecause it serves to choreograph and motivate individuals to do amazing things.Managerial work is exciting, and it is hard to imagine that there will ever be ashortage of demand for capable, energetic managers On the other hand,managerial work is necessarily fast-paced and fragmented, where managers at alllevels express the opinion that they must process much more information andmake more decisions than they could have ever possibly imagined So, just as themost successful organizations seem to have well-formed and well-executedstrategies, there is also a strong need for managers to have good strategies aboutthe way they will approach their work This is exactly what you will learn throughprinciples of management

K E Y T A K E A W A Y

Managers are responsible for getting work done through others Wetypically describe the key managerial functions as planning, organizing,leading, and controlling The definitions for each of these have evolved overtime, just as the nature of managing in general has evolved over time Thisevolution is best seen in the gradual transition from the traditional

hierarchical relationship between managers and employees, to a climatecharacterized better as an upside-down pyramid, where top executivessupport middle managers and they, in turn, support the employees whoinnovate and fulfill the needs of customers and clients Through all fourmanagerial functions, the work of managers ranges across ten roles, fromfigurehead to negotiator While actual managerial work can seem

challenging, the skills you gain through principles ofmanagement—consisting of the functions of planning, organizing, leading,and controlling—will help you to meet these challenges

E X E R C I S E S

1 Why do organizations need managers?

2 What are some different types of managers and how do they differ?

3 What are Mintzberg’s ten managerial roles?

4 What three areas does Mintzberg use to organize the ten roles?

5 What four general managerial functions do principles of managementinclude?

1.2 Leadership, Entrepreneurship, and Strategy

If management is defined as getting things done through others, thenleadership4

should be defined as the social and informal sources of influence that you use toinspire action taken by others It means mobilizing others to want to struggletoward a common goal Great leaders help build an organization’s human capital,then motivate individuals to take concerted action Leadership also includes anunderstanding of when, where, and how to use more formal sources of authorityand power, such as position or ownership Increasingly, we live in a world where

good management requires good leaders and leadership While these views about the

importance of leadership are not new (see “Views on Managers Versus Leaders”),competition among employers and countries for the best and brightest, increasedlabor mobility (think “war for talent” here), and hypercompetition puts pressure onfirms to invest in present and future leadership capabilities

P&G provides a very current example of this shift in emphasis to leadership as a keyprinciple of management For example, P&G recruits and promotes those

individuals who demonstrate success through influence rather than direct orcoercive authority Internally, there has been a change from managers beingoutspoken and needing to direct their staff, to being individuals who electrify andinspire those around them Good leaders and leadership at P&G used to implyhaving followers, whereas in today’s society, good leadership means followershipand bringing out the best in your peers This is one of the key reasons that P&G hasbeen consistently ranked among the top ten most admired companies in the United

States for the last three years, according to Fortune magazine.Ranking of Most

Admired Firms for 2006, 2007, 2008.http://www.fortune.com(accessed October 15,2008)

4 The act of influencing others

toward a goal.

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Figure 1.5

Leaders inspire the collective action of others toward a shared goal.

© 2010 Jupiterimages Corporation

Whereas P&G has been around for some 170 years, another winning firm in terms ofleadership is Google, which has only been around for little more than a decade.Both firms emphasize leadership in terms of being exceptional at developingpeople Google has topped Fortune’s 100 Best Companies to Work for the past twoyears Google’s founders, Sergey Brin and Larry Page, built a company around theidea that work should be challenging and the challenge should be

fun.http://www.google.com/intl/en/corporate/tenthings.html(accessed October

15, 2008) Google’s culture is probably unlike any in corporate America, and it’s notbecause of the ubiquitous lava lamps throughout the company’s headquarters orthat the company’s chef used to cook for the Grateful Dead In the same way Googleputs users first when it comes to online service, Google espouses that it putsemployees first when it comes to daily life in all of its offices There is an emphasis

on team achievements and pride in individual accomplishments that contribute tothe company’s overall success Ideas are traded, tested, and put into practice with aswiftness that can be dizzying Observers and employees note that meetings thatwould take hours elsewhere are frequently little more than a conversation in linefor lunch and few walls separate those who write the code from those who write thechecks This highly communicative environment fosters a productivity and

camaraderie fueled by the realization that millions of people rely on Google results.Leadership at Google amounts to a deep belief that if you give the proper tools to agroup of people who like to make a difference, they will

Views on Managers Versus Leaders

My definition of a leader…is a man who can persuade people to do what theydon’t want to do, or do what they’re too lazy to do, and like it

- Harry S Truman (1884–1972), 33rd president of the United StatesYou cannot manage men into battle You manage things; you lead people

- Grace Hopper (1906–1992), Admiral, U.S NavyManagers have subordinates—leaders have followers

- Chester Bernard (1886–1961), former executive and author of Functions of the

Executive

The first job of a leader is to define a vision for the organization…Leadership isthe capacity to translate vision into reality

- Warren Bennis (1925–), author and leadership scholar

A manager takes people where they want to go A great leader takes peoplewhere they don’t necessarily want to go but ought to

- Rosalynn Carter (1927–), First Lady of the United States, 1977–1981

Entrepreneurship

It’s fitting that this section on entrepreneurship follows the discussion of Google

Entrepreneurship5is defined as the recognition of opportunities (needs, wants,problems, and challenges) and the use or creation of resources to implementinnovative ideas for new, thoughtfully planned ventures Perhaps this is obvious,but anentrepreneur6is a person who engages in the process of entrepreneurship

We describe entrepreneurship as a process because it often involves more thansimply coming up with a good idea—someone also has to convert that idea intoaction As an example of both, Google’s leaders suggest that its point of distinction

5 The recognition of

opportunities (needs, wants,

problems, and challenges) and

the use or creation of resources

to implement innovative ideas

for new, thoughtfully planned

“is anticipating needs not yet articulated by our global audience, then meetingthem with products and services that set new standards This constant

dissatisfaction with the way things are is ultimately the driving force behind theworld’s best search engine.”http://www.google.com/intl/en/corporate/

tenthings.html(accessed October 15, 2008)

Entrepreneurs and entrepreneurship are the catalysts for value creation Theyidentify and create new markets, as well as foster change in existing ones However,such value creation first requires an opportunity Indeed, the opportunity-drivennature of entrepreneurship is critical Opportunities are typically characterized asproblems in search of solutions, and the best opportunities are big problems insearch of big solutions “The greater the inconsistencies in existing service andquality, in lead times and in lag times, the greater the vacuums and gaps in

information and knowledge, the greater the opportunities.” J Timmons, The

Entrepreneurial Process (New York: McGraw-Hill, 1999), 39 In other words, bigger

problems will often mean there will be a bigger market for the product or servicethat the entrepreneur creates We hope you can see why the problem-solving,opportunity-seeking nature of entrepreneurship is a fundamental building block foreffective principles of management

Strategy

When an organization has a long-term purpose, articulated in clear goals andobjectives, and these goals and objectives can be rolled up into a coherent plan of

action, then we would say that the organization has a strategy It has a good or even

great strategy when this plan also takes advantage of unique resources and

capabilities to exploit a big and growing external opportunity.Strategy7then, isthe central, integrated, externally-oriented concept of how an organization willachieve its objectives.D Hambrick and J Fredrickson, “Are You Sure You Have a

Strategy?” Academy of Management Executive 15, no 4 (2001): 2.Strategic management8is the body of knowledge that answers questions about thedevelopment and implementation of good strategies

Strategic management is important to all organizations because, when correctlyformulated and communicated, strategy provides leaders and employees with aclear set of guidelines for their daily actions This is why strategy is so critical to theprinciples of management you are learning about Simply put, strategy is aboutmaking choices: What do I do today? What shouldn’t I be doing? What should myorganization be doing? What should it stop doing?

7 The central, integrated,

externally-oriented concept of

how an organization will

achieve its objectives.

8 What an organization does to

achieve its mission and vision.

Synchronizing Leadership, Entrepreneurship, and Strategy

You know that leadership, entrepreneurship, and strategy are the inspiration forimportant, valuable, and useful principles of management Now you will want tounderstand how they might relate to one another In terms of principles ofmanagement, you can think of leadership, entrepreneurship, and strategicmanagement as answering questions about “who,” “what,” and “how.” Leadershiphelps you understand who helps lead the organization forward and what the criticalcharacteristics of good leadership might be Entrepreneurial firms and

entrepreneurs in general are fanatical about identifying opportunities and solvingproblems—for any organization, entrepreneurship answers big questions about

“what” an organization’s purpose might be Finally, strategic management aims tomake sure that the right choices are made—specifically, that a good strategy is inplace—to exploit those big opportunities

One way to see how leadership, entrepreneurship, and strategy come together for

an organization—and for you—is through a recent (disguised) job posting fromCraigslist Look at the ideal candidate characteristics identified in the Help Wantedad—you don’t have to look very closely to see that if you happen to be a recentbusiness undergrad, then the organization depicted in the ad is looking for you Theposting identifies a number of areas of functional expertise for the target candidate.You can imagine that this new position is pretty critical for the success of thebusiness For that reason, we hope you are not surprised to see that, beyondfunctional expertise, this business seeks someone with leadership, entrepreneurial,and strategic orientation and skills Now you have a better idea of what those keyprinciples of management involve

Help Wanted—Chief of Staff

We’re hiring a chief of staff to bring some order to the mayhem of our firm’sgrowth You will touch everything at the company, from finance to sales,marketing to operations, recruiting to human resources, accounting to investorrelations You will report directly to the CEO

Here’s what you’re going to be asked to do across a range of functional areas inthe first ninety days, before your job evolves into a whole new set of

responsibilities:

Marketing

• Leverage our existing customer base using best-in-class directmarketing campaigns via e-mail, phone, Web, and print or mailcommunications

• Convert our current customer spreadsheet and database into ahighly functional, lean customer relationship management (CRM)system—we need to build the infrastructure to service and reachout to customers for multiple users

• Be great at customer service personally—excelling in person and

on the phone, and you will help us build a Ninja certificationsystem for our employees and partners to be like you

• Build our Web-enabled direct sales force, requiring a lot ofstrategic work, sales-force incentive design and experimentation,and rollout of Web features to support the direct channel

Sales

• Be great at demonstrating our product in the showroom, as well as

at your residence and in the field—plan to be one of the top salesreps on the team (and earn incremental variable compensation foryour efforts)

Finance and Accounting

• Build our financial and accounting structures and processes, takeover QuickBooks, manage our team of accountants, hire additionalresources as needed, and get that profit and loss statement (P&L)rocking.

• Figure out when we should pay our bills and manage teammembers to get things paid on time and manage our workingcapital effectively

• Track our actual revenues and expenses against your ownprojection—you will be building and running our financial model.Operations

• We are building leading-edge capabilities on returns, exchanges,and shipping—you will help guide strategic thinking on

operational solutions and will implement them with ouroperations manager

• We are looking for new headquarters, you may help identify, buildout, and launch

HR and Recruiting

• We are recruiting a team of interns—you will take the lead on theprogram, and many or all of them will report to you; you will be anombudsman of sorts for our summer program

• The company has a host of HR needs that are currently handled bythe CEO and third parties; you will take over many of these

Production and Product Development

• The company is actively recruiting a production assistant/

manager—in the meanwhile, there are a number of Web-facing andvendor-facing activities you will pitch in on

The Ideal Candidate Is…

• a few years out of college but is at least two or three years awayfrom going to business or other graduate school;

• charismatic and is instantly likeable to a wide variety of people,driven by sparkling wit, a high degree of extraversion, and abalanced mix of self-confidence and humility;

• able to read people quickly and knows how to treat peopleaccordingly;

• naturally compassionate and demonstrates strong empathy, easilythinking of the world from the perspective of another person;

• an active listener and leaves people with the sense that they arewell heard;

• exceptionally detail-oriented and has a memory like a steeltrap—nothing falls through the cracks;

• razor sharp analytically, aced the math section of their SAT test,and excels at analyzing and solving problems;

• a perfectionist and keeps things in order with ease

K E Y T A K E A W A Y

The principles of management are drawn from three specificareas—leadership, entrepreneurship, and strategic management Youlearned that leadership helps you understand who helps lead theorganization forward and what the critical characteristics of goodleadership might be Entrepreneurs are fanatical about identifyingopportunities and solving problems—for any organization, entrepreneurshipanswers big questions about “what” an organization’s purpose might be

Finally, as you’ve already learned, strategic management aims to make surethat the right choices are made—specifically, that a good strategy is inplace—to exploit those big opportunities

1.3 Planning, Organizing, Leading, and Controlling

L E A R N I N G O B J E C T I V E S

1 Know the dimensions of the planning-organizing-leading-controlling O-L-C) framework

(P-2 Know the general inputs into each P-O-L-C dimension

A manager’s primary challenge is to solve problems creatively While drawing from

a variety of academic disciplines, and to help managers respond to the challenge ofcreative problem solving, principles of management have long been categorizedinto the four major functions of planning, organizing, leading, and controlling (theP-O-L-C framework) The four functions, summarized in the P-O-L-C figure, areactually highly integrated when carried out in the day-to-day realities of running

an organization Therefore, you should not get caught up in trying to analyze andunderstand a complete, clear rationale for categorizing skills and practices thatcompose the whole of the P-O-L-C framework

It is important to note that this framework is not without criticism Specifically,these criticisms stem from the observation that the P-O-L-C functions might beideal but that they do not accurately depict the day-to-day actions of actual

managers.H Mintzberg, The Nature of Managerial Work (New York: Harper & Row, 1973); D Lamond, “A Matter of Style: Reconciling Henri and Henry,” Management

Decision 42, no 2 (2004): 330–56 The typical day in the life of a manager at any level

can be fragmented and hectic, with the constant threat of having priorities dictated

by the law of the trivial many and important few (i.e., the 80/20 rule) However, thegeneral conclusion seems to be that the P-O-L-C functions of management stillprovide a very useful way of classifying the activities managers engage in as theyattempt to achieve organizational goals.D Lamond, “A Matter of Style: Reconciling

Henri and Henry,” Management Decision 42, no 2 (2004): 330–56.

27

Figure 1.6 The P-O-L-C Framework

Planning

Planning is the function of management that involves setting objectives anddetermining a course of action for achieving those objectives Planning requiresthat managers be aware of environmental conditions facing their organization andforecast future conditions It also requires that managers be good decision makers

Planning is a process consisting of several steps The process begins with

environmental scanning9which simply means that planners must be aware of thecritical contingencies facing their organization in terms of economic conditions,their competitors, and their customers Planners must then attempt to forecastfuture conditions These forecasts form the basis for planning

Planners must establish objectives, which are statements of what needs to beachieved and when Planners must then identify alternative courses of action forachieving objectives After evaluating the various alternatives, planners must makedecisions about the best courses of action for achieving objectives They must thenformulate necessary steps and ensure effective implementation of plans Finally,planners must constantly evaluate the success of their plans and take correctiveaction when necessary

There are many different types of plans and planning

Strategic planning10involves analyzing competitive opportunities and threats, aswell as the strengths and weaknesses of the organization, and then determininghow to position the organization to compete effectively in their environment.Strategic planning has a long time frame, often three years or more Strategicplanning generally includes the entire organization and includes formulation ofobjectives Strategic planning is often based on the organization’s mission, which isits fundamental reason for existence An organization’s top management most oftenconducts strategic planning

9 The act of analyzing the critical

external contingencies facing

an organization in terms of

economic conditions,

competitors, and customers.

10 The process of analyzing

competitive opportunities and

threats, as well as the strengths

and weaknesses of the

organization, and then

determining how to position

the organization to compete

effectively in its environment.

Tactical planning11is intermediate-range (one to three years) planning that isdesigned to develop relatively concrete and specific means to implement thestrategic plan Middle-level managers often engage in tactical planning.

Operational planning12generally assumes the existence of organization-wide orsubunit goals and objectives and specifies ways to achieve them Operationalplanning is short-range (less than a year) planning that is designed to developspecific action steps that support the strategic and tactical plans

Organizing

Organizing is the function of management that involves developing anorganizational structure and allocating human resources to ensure theaccomplishment of objectives The structure of the organization is the frameworkwithin which effort is coordinated The structure is usually represented by anorganization chart, which provides a graphic representation of the chain ofcommand within an organization Decisions made about the structure of anorganization are generally referred to asorganizational design13decisions

Organizing also involves the design of individual jobs within the organization.Decisions must be made about the duties and responsibilities of individual jobs, aswell as the manner in which the duties should be carried out Decisions made aboutthe nature of jobs within the organization are generally called “job design”

decisions

Organizing at the level of the organization involves deciding how best todepartmentalize, or cluster, jobs into departments to coordinate effort effectively.There are many different ways to departmentalize, including organizing byfunction, product, geography, or customer Many larger organizations use multiplemethods of departmentalization

Organizing at the level of a particular job involves how best to design individualjobs to most effectively use human resources Traditionally,job design14was based

on principles of division of labor and specialization, which assumed that the morenarrow the job content, the more proficient the individual performing the job couldbecome However, experience has shown that it is possible for jobs to become toonarrow and specialized For example, how would you like to screw lids on jars oneday after another, as you might have done many decades ago if you worked incompany that made and sold jellies and jams? When this happens, negativeoutcomes result, including decreased job satisfaction and organizationalcommitment, increased absenteeism, and turnover

11 Intermediate-range planning

that is designed to develop

relatively concrete and specific

means to implement the

strategic plan.

12 Assumes the existence of goals

and objectives and specifies

ways to achieve them.

13 The matching of organizational

form, such as structure,

reporting relationships, and

information technology, with

the organization’s strategy.

14 The process of putting together

various elements to form a job,

bearing in mind organizational

and individual worker

requirements.

Recently, many organizations have attempted to strike a balance between the needfor worker specialization and the need for workers to have jobs that entail varietyand autonomy Many jobs are now designed based on such principles as

empowerment,job enrichment15andteamwork16 For example, HUIManufacturing, a custom sheet metal fabricator, has done away with traditional

“departments” to focus on listening and responding to customer needs Fromcompany-wide meetings to team huddles, HUI employees know and understandtheir customers and how HUI might service them best.http://www.huimfg.com/abouthui-yourteams.aspx(accessed October 15, 2008)

Leading

Leading involves the social and informal sources of influence that you use to inspireaction taken by others If managers are effective leaders, their subordinates will beenthusiastic about exerting effort to attain organizational objectives

The behavioral sciences have made many contributions to understanding thisfunction of management Personality research and studies of job attitudes provideimportant information as to how managers can most effectively lead subordinates.For example, this research tells us that to become effective at leading, managersmust first understand their subordinates’ personalities, values, attitudes, andemotions

Studies of motivation and motivation theory provide important information aboutthe ways in which workers can be energized to put forth productive effort Studies

of communication provide direction as to how managers can effectively andpersuasively communicate Studies of leadership and leadership style provideinformation regarding questions, such as, “What makes a manager a good leader?”and “In what situations are certain leadership styles most appropriate and

effective?”

15 A job redesign technique that

allows workers more control

over how they perform their

own tasks.

16 Cooperative effort by the

members of a group or team to

achieve a common goal.

Figure 1.7

Quality control ensures that the organization delivers on its promises.

© 2010 Jupiterimages Corporation

Controlling

Controlling involves ensuring that performance doesnot deviate from standards Controlling consists ofthree steps, which include (1) establishing performancestandards, (2) comparing actual performance againststandards, and (3) taking corrective action whennecessary Performance standards are often stated inmonetary terms such as revenue, costs, or profits butmay also be stated in other terms, such as unitsproduced, number of defective products, or levels ofquality or customer service

The measurement of performance can be done inseveral ways, depending on the performance standards,including financial statements, sales reports, productionresults, customer satisfaction, and formal performanceappraisals Managers at all levels engage in the

managerial function of controlling to some degree

The managerial function of controlling should not beconfused with control in the behavioral or manipulativesense This function does not imply that managersshould attempt to control or to manipulate thepersonalities, values, attitudes, or emotions of their subordinates Instead, thisfunction of management concerns the manager’s role in taking necessary actions toensure that the work-related activities of subordinates are consistent with andcontributing toward the accomplishment of organizational and departmentalobjectives

Effective controlling requires the existence of plans, since planning provides thenecessary performance standards or objectives Controlling also requires a clearunderstanding of where responsibility for deviations from standards lies Twotraditional control techniques are budget and performance audits An auditinvolves an examination and verification of records and supporting documents Abudget audit provides information about where the organization is with respect towhat was planned or budgeted for, whereas a performance audit might try todetermine whether the figures reported are a reflection of actual performance.Although controlling is often thought of in terms of financial criteria, managersmust also control production and operations processes, procedures for delivery ofservices, compliance with company policies, and many other activities within theorganization

The management functions of planning, organizing, leading, and controlling arewidely considered to be the best means of describing the manager’s job, as well asthe best way to classify accumulated knowledge about the study of management.Although there have been tremendous changes in the environment faced bymanagers and the tools used by managers to perform their roles, managers stillperform these essential functions.

K E Y T A K E A W A Y

The principles of management can be distilled down to four criticalfunctions These functions are planning, organizing, leading, andcontrolling This P-O-L-C framework provides useful guidance into what theideal job of a manager should look like

E X E R C I S E S

1 What are the management functions that comprise the P-O-L-Cframework?

2 Are there any criticisms of this framework?

3 What function does planning serve?

4 What function does organizing serve?

5 What function does leading serve?

6 What function does controlling serve?

1.4 Economic, Social, and Environmental Performance

L E A R N I N G O B J E C T I V E S

1 Be able to define economic, social, and environmental performance

2 Understand how economic performance is related to social andenvironmental performance

Webster’s dictionary defines performance as “the execution of an action” and

“something accomplished.”http://www.merriam-webster.com/dictionary/

performance(accessed October 15, 2008) Principles of management help you betterunderstand the inputs into critical organizational outcomes like a firm’s economicperformance Economic performance is very important to a firm’sstakeholders17

particularly its investors or owners, because this performance eventually providesthem with a return on their investment Other stakeholders, like the firm’s

employees and the society at large, are also deemed to benefit from suchperformance, albeit less directly Increasingly though, it seems clear thatnoneconomic accomplishments, such as reducing waste and pollution, for example,are key indicators of performance as well Indeed, this is why the notion of the

triple bottom line18is gaining so much attention in the business press Essentially,the triple bottom line refers to The measurement of business performance along

social, environmental, and economic dimensions We introduce you to economic,

social, and environmental performance and conclude the section with a briefdiscussion of the interdependence of economic performance with other forms ofperformance

Economic Performance

In a traditional sense, the economic performance of a firm is a function of itssuccess in producing benefits for its owners in particular, through productinnovation and the efficient use of resources When you talk about this type ofeconomic performance in a business context, people typically understand you to bespeaking about some form of profit

The definition of economic profit is the difference between revenue and theopportunity cost of all resources used to produce the items sold.W P Albrecht,

Economics (Englewood Cliffs, NJ: Prentice Hall, 1983) This definition includes

implicit returns as costs For our purposes, it may be simplest to think of economicprofit as a form ofaccounting profit19where profits are achieved when revenues

17 Individuals and organizations

who are actively involved in

the organization or whose

interests may be positively or

negatively affected as a result

of what the organization does.

18 The measurement of business

performance along social,

environmental, and economic

dimensions.

19 The difference between an

organization’s revenues and its

costs in a given period of time.

33

exceed the accounting cost the firm “pays” for those inputs In other words, yourorganization makes a profit when its revenues are more than its costs in a givenperiod of time, such as three months, six months, or a year.

Before moving on to social and environmental performance, it is important to note

that customers play a big role in economic profits Profits accrue to firms because

customers are willing to pay a certain price for a product or service, as opposed to acompetitor’s product or service of a higher or lower price If customers are onlywilling to make purchases based on price, then a firm, at least in the face ofcompetition, will only be able to generate profit if it keeps its costs under control

Social and Environmental Performance

You have learned a bit about economic performance and its determinants For mostorganizations, you saw that economic performance is associated with profits, andprofits depend a great deal on how much customers are willing to pay for a good orservice

With regard to social and environmental performance, it is similarly useful to think

of them as forms of profit—social and environmental profit to be exact

Increasingly, the topics of social and environmental performance have garneredtheir own courses in school curricula; in the business world, they are collectivelyreferred to ascorporate social responsibility (CSR)20

CSR is a concept whereby organizations consider the interests of society by takingresponsibility for the impact of their activities on customers, suppliers, employees,shareholders, communities, and the environment in all aspects of their operations.This obligation is seen to extend beyond the statutory obligation to comply withlegislation and sees organizations voluntarily taking further steps to improve thequality of life for employees and their families, as well as for the local communityand society at large

Two companies that have long blazed a trail in CSR are Ben & Jerry’s and S C.Johnson Their statements about why they do this, summarized inTable 1.1

"Examples of leading firms with strong CSR orientations", capture many of thefacets just described

20 When organizations consider

the interests of society by

taking responsibility for the

effect of their activities on

customers, suppliers,

employees, shareholders,

communities, and the

environment in all aspects of

their operations.